A retired couple's adventures of building a custom home

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New year, new milestones, new adventures, new house?

A new year is unfolding–like a blossom with petals curled tightly concealing the beauty within. ~ Unknown Author

As I start each new year I naturally reflect back on the previous year as I write important dates on my new wall calendar. 2013 was no different. I took down the 2012 calendar and went through it month for month adding birthdays, anniversaries, and other important reminders on the new calendar. So, while I was reflecting, I noticed I left out a couple of things which happened at the end of 2012.

I think I hinted a couple posts ago that there would be even more new improvements added to our house. Turns out that while we were down to visit Jill and Jim in September, we had a hail storm back at home. Our neighbor called Bill to tell him that while we were away. When we got back home we didn’t see any visible damage but Bill thought I should probably call the insurance company just in case. Long story short, we had lots of damage. Enough damage to warrant a new roof on the house and the shed and new gutters! Of course, you might know that the year before our homeowners insurance had changed our policy that our deductible for any hail damage would be 10% of the house value instead of our usual $500.

The good news: we still got a good deal and new owners of this house will appreciate a new roof and gutters. I hope! 🙂 The roof and gutters were installed in December.

The bad news: the roofers messed up three of our new windows! 😦 Unfortunately, they are the three awning windows in the front of our house. They bent all the flashing. We did deduct the amount of the repair from the roof bill. However, we are still waiting to get those windows repaired. The window guys said it needs to be above freezing for them to be able to caulk. So, we wait until this silly winter ever ends.

Another improvement we made in late 2012 was to have the front concrete landing torn out and another concrete landing installed. This was an eye-sore ever since we bought this house. There was a large crack in that landing. After we purchased the house, we had a company “shore up” the landing and add concrete to the crack. In addition we had added a concrete overlay pattern on the landing and the walkway up to the house. But with every winter of freeze and thaw, that landing would crack again. Our neighbor’s adult son does concrete work for a living. He just happened to be next door at the right time and gave us a great price. It looks much better now. It will definitely make a much better first impression before entering the house. We still need to power wash the walkway and front landing, but here is an after pix.

Front landing

I’m ready to move on to 2013! Thirteen has not been an unlucky number for me and Bill. We were married on April 13. This year we will be married for 45 years!!!! Our son and daughter-in-law were married on March 13. So, we feel that 2013 will be a GOOD year for us.

Sandy and Bill’s wedding

Bill was turning 65 on January 26. He wanted to make a decision about retirement soon. Following the rules, Bill signed up for Medicare back in September 2012 – three months before his 65th birthday. But wait . . . he didn’t need Medicare yet because he was still working and was still covered under his company’s health benefits. We thought he would get a penalty if he didn’t sign up on time. Then we got a notice that said we could not contribute to our HSA (health savings account) if Bill was on Medicare. 😦 Poor Bill made so many phone calls to verify what to do. He had to go down to the Social Security office in person and unenroll from Medicare. Of course, in the meantime, he receives his Medicare card. 🙂

Soon after that Bill found out that if he retired before April 1 he would receive 6 weeks vacation pay when he left. Hmmmmm, that was tempting. But, Bill wasn’t sure if he should just go ahead and plan to work until August when I turned 65. His thinking was we wouldn’t have to worry about our health insurance and we could use the extra money toward the new house. Talk about all the life stressors you can go through! We were hitting a lot of them and all at the same time – selling our home, planning on building a new home, retirement, and Medicare! Auuuccckkkkk! 😯

Early in January we set up a meeting with our financial adviser. We had been working with him for years planning for these days ahead. The purpose of our meeting on January 8 was to discuss Bill’s retirement date. Should he retire at the end of March or wait until August?

I have to tell you . . . we feel that our financial adviser, Mike Wagner was a Godsend to us several year ago. Our first financial adviser was young and was recommended by someone from school. He set up a couple of accounts for us, but Bill did not connect with him. That was a problem. You have to have trust in someone who is going to be handling your money for your retirement. Bill heard about Mike through a co-worker. We love this guy and his assistant Andrea. Talk about customer service! Good customer service is hard to come by these days. These two are always willing to help us.

Back to the January 8 meeting. Mike always meets us at our home. He lives in the same town as we do. We met after Bill got home from work. We discussed Bill’s decision to retire in 2013. We talked about selling the house. Mike asked about how much we thought it was going to cost to build the new house. We worked on a retirement budget. Thank goodness I had already made a retirement budget and had tweaked it for months. We talked about how much we needed to take out for federal taxes on Social Security. Then we talked about the amount we would take out from our investments on a monthly basis. Is your head spinning yet? Mine was. And, of course, the fear of the unknown started to creep in. 😕

Once that was all done, Mike suggested two things. First, he said that even though everything on paper showed we were in good shape, he thought we should contact some financial institution to see if we actually qualified for a construction loan for the new house. I had worried about that for some time. I didn’t know anyone who was retired and was building a new home and would have a mortgage. In addition, Mike said that the laws had changed so much in the last several years, he just wanted to make sure we knew what was ahead of us beforehand. This turned out to be great advice! We even talked about taking the money out of our investments and paying cash for the house. Mike said he didn’t see anything wrong with us having a mortgage since we could still deduct property taxes and mortgage interests from our taxes.

The second thing Mike suggested was that in the whole scheme of things, there really wasn’t a huge advantage financially for Bill to wait and retire in August. He said if Bill was ready to go sooner, he should retire at the end of March and start enjoying retirement.

Months before I had contacted our bank about a construction loan and had corresponded via email with the regional loan originator about some generic information and qualifications. I called her the next day and set up a meeting on January 16 to see if we could go over our scenarios. She emailed me several forms which I filled out during the week before we met.

Remember all those items we had purchased for the new house? Remember me mentioning that there was a specification document that went along with our house plans? Those two played together and became very important for the meeting with the loan originator. Most people do not buy materials/items before they build. Those items are all rolled into the “build” price as allowances from the total amount you borrow. We were trying to mortgage as least amount of money as we could. So buying stuff beforehand was our way of decreasing our mortgage. However, those items also acted as equity in the new house. 🙂 Our land purchase was paid off. So, the land plus the house purchases all could be applied toward having 20% down. In addition, we also plan to put a good chunk of money down from the sale of our present home.

So, that specification document was supposed to have everything listed that we had purchased for the new house along with a lot more information which Jim had already entered and we would update if things changed. The Plumber would need to know what faucets we purchased and which ones we wanted him to include in his bid. The electrician would need to know what lighting we purchased and what materials he would need to include in his bid. Etc, etc. Bill didn’t like the format of the spec document we used for our preliminary bid. He wanted to change it more like the spec documents they used at his work. He spent several days copying and pasting all the information from the old document into the new one and then handed it over to me to update everything. 😯

I procrastinated working on the spec document. I loathed, detested, despised, and very much disliked working on this document. Get the picture? And the worst part of it all, it was in Microsoft Word and all of our purchases were in tables. And we were switching between Microsoft Word for Windows and Microsoft Word for Mac. It was not pretty. It kept distorting the tables. I was so frustrated. Finally, I just entered all the items and let Bill reformat all the distortion afterwards. He is a whiz at that. I’m too impatient. (If anyone whom I worked with for years at the schools is reading this and didn’t know this about me, I guess I fooled you all those years since I always had to find a way to solve your problems whether I liked it or not. 🙂 )

Enough about the dreaded document! I ended up creating several spreadsheets before our bank meeting: retirement budget; new house bid budget; improvements to the land costs; and materials/items we purchased along with costs. The loan originator didn’t ask for this information beforehand, but every bit of it was necessary during our meeting to determine our qualifications for a construction loan for the amount we needed to build the house and the pole barn. I’m going to brag here – I’m glad I had the time and know-with-all to have thought about this before our bank meeting.

We ended up going through several scenarios of income and costs. We wanted to see if we qualified for our worst case scenario. We did qualify even without me starting Social Security. YAY!!!! However, the loan originator said that our retirement income would need a history and a paper trail for us to qualify when the time comes. Meaning, she suggested that we immediately start taking out our monthly allotment from our investments. She said we would have a paper trail from Bill’s work income and his Social Security. We had a paper trail from my retirement fund payments for the last several years. She said if we waited to start taking out from our investments until right before we started to build, we would probably be declined. She said a retired couple had come in a few weeks before us and wanted to start building a home. However, they were declined for a home construction loan because they had not been taking out a monthly income from their investments. They had a portfolio to show how much they had in their investments, but because there was no paper trail of a monthly income from it, they were declined. We were so glad we checked all of this out sooner than later!

After the meeting, Bill and I hugged each other out of relief that we were going to be able to build our dream home and workshop pole barn. Bill looked at me and said, “I’m going to retire on March 28!” He made it official the next day at his workplace. Whew!

Great segment, as usual, Sandy. This blog will be very helpful for others who may be facing the same things in the future. The Medicare/Social Security issues are a nightmare! It took us many meetings to figure it all out.

Arlene, I was talking to my sister yesterday saying I kept debating whether to share all of these personal struggles we’ve been going through. But, it is our life right now and I feel we can’t be the only ones struggling with all these crazy decisions. Bill and I are both researchers. We sometimes go too far with it, but in the end, we try and make decisions based on all the information we find. 🙂